Income  Tax 
Information 


Revised  Copy  of 
Internal  Revenue  Regulations 


Compliments  of 

TRUST  DEPARTMENT 

[HARRIS  TRUST  6-  SAVINGS  BANK 

Organized  as  N.  W.  Harris  Co.  1882.  Incorporated  1907 

HARRIS  TRUST  BUILDING.  CHICAGO 


Internal  Revenue 
Regulations 

I 


REGARDING  THE  DEDUCTION 
OF  THE  INCOME  TAX  AT  THE  SOURCE 
ON  INTEREST  MATURING  ON  BONDS,  NOTES 
AND  OTHER  SIMILAR  OBLIGATIONS  OF 
CORPORATIONS,  JOINT  STOCK 
COMPANIES,  OR  ASSOCIATIONS  AND 
INSURANCE  COMPANIES,  UNDER 
THE  PROVISIONS  OF  SECTION  II 
OF  THE  ACT  OF  OCTOBER  3,  1913. 


REPRINTED  AS  ISSUED 
AND  SUBSEQUENTLY  REVISED 
BY  THE  INTERNAL  REVENUE 
DEPARTMENT 
OCTOBER  25,  1913 


Compliments  of 

TRUST  DEPARTMENT 

Harris  Trust  dr  saving^  bank 

Organized  as  N.  W.  Harris  dr  Co.  1882,  Incorporated  1907 

HARRIS  TRUST  BUILDING,  CHICAGO 


HARRIS  TRUST  6-  SAVINGS  BANK 


Tax  to  be  Deducted  at  Source 


Under  the  Income  Tax  Law,  enacted 
October  3,  1913,  a tax  of  one  per  cent,  desig- 
nated in  the  law  as  the  normal  tax , shall  be 
deducted  at  “the  source,”  beginning  Novem- 
ber 1,  1913,  from  all  income  accruing  and 
payable  to: 

(a)  Every  citizen  of  the  United  States, 
whether  residing  at  home  or  abroad, 
and  to 

(b)  Every  person  residing  in  the  United 
States,  though  not  a citizen  thereof, 

which  may  be  derived  from  interest  upon 
bonds  and  mortgages,  or  deeds  of  trust,  or 
other  similar  obligations,  including  equip- 
ment trust  agreements  and  receivers’  certi- 
ficates of  corporations,  joint  stock  companies 
or  associations,  and  insurance  companies, 
although  such  interest  does  not  amount  to 
three  thousand  dollars,  excepting  only  the 
interest  upon  the  obligations  of  the  United 
States  or  its  possessions,  or  a State  or  any 
political  subdivision  thereof. 

The  term  “Debtor,”  as  hereinafter  used, 
shall  be  construed  to  cover  all  corporations, 
joint  stock  companies  or  associations,  and  in- 
surance companies. 


When  Tax  Shall  be  Withheld  by  Debtor 

For  the  purposes  of  collecting  this  tax  on 
all  coupons  and  registered  interest,  originat- 
ing, or  payable  in  the  United  States  the 
source  9hall  be  the  Debtor  (or  its  paying 
agent  in  t\he  United  States)  which  shall  de- 
duct the  tak  when  same  is  to  be  withheld, 
and  no  otheA  bank,  trust  company,  banking 
firm,  or  individual  taking  coupons  or  interest 
orders  for  collection  or  otherwise,  shall  with- 
hold the  tax  thereof:  Provided,  that  all  such 
coupons  or  orders  far  registered  interest  are 
accompanied  by  certificates  of  ownership  signed 


\ 


2 


^ F M h.m.f. 


lu.  ‘b  a 

I - 5 

HARRIS  TRUST  &•  SAVINGS  BANK 

by  the  owners  of  the  bonds  upon  which  the 
interest  matured.  These  certificates  shall  be  in 
the  forms  hereinafter  prescribed  and  a sepa- 
rate certificate  shall  be  made  out  by  each 
owner  of  bonds  for  the  coupons  or  interest 
orders  for  each  separate  issue  of  bonds  or  ob- 
litigations,  of  each  Debtor. 

When  Tax  Shall  be  Withheld  by  First 
Collecting  Agency 

If,  however,  the  coupons  or  interest  orders 
are  not  accompanied  by  certificates  as  pre- 
scribed above,  the  first  bank,  trust  company, 
banking  firm  or  individual,  or  collecting  agency 
receiving  the  coupons  or  interest  orders  for 
collection,  or  otherwise,  shall  deduct  and  with- 
hold the  tax  and  shall  attach  to  such  coupons 
or  interest  orders  its  own  certificate,  giving 
the  name  and  address  of  the  owner  of,  or  the 
person  presenting  such  coupons  or  interest 
orders  if  the  owner  is  not  known,  with  a de- 
scription of  the  coupons  or  interest  orders; 
also  setting  forth  the  fact  that  they  are  with- 
holding the  tax  upon  them;  whereupon  the 
Debtor  shall  not  again  withhold  the  tax  on 
said  coupons  or  interest  orders,  but  in  lieu 
thereof  shall  deliver  to  the  Government  the 
certificate  of  such  bank,  trust  company,  etc., 
which  is  withholding  such  tax  money. 

Any  corporation,  collecting  agency,  or  per- 
son first  receiving  from  the  owner  any  inter- 
est coupons  or  orders  for  the  collection  of 
registered  interest,  and  to  whom  the  certi- 
ficates above  provided  for  are  delivered, 
should  require  the  persons  tendering  such  cou- 
pons or  orders  for  registered  interst  to  satis- 
factorily establish  their  identity. 

-O 

Payment  of  Registered  Interest  by  Debtors 

A Debtor,  whose  bonds  may  be  registered, 
both  as  to  principal  and  interest,  shall  deduct 


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HARRIS  TRUST  ^ SAVINGS  BANK 


the  normal  tax  of  one  per  cent  from  the  ac- 
cruing interest  on  all  bonds  before  sending 
out  checks  for  said  interest  to  registered  own- 
ers or  before  paying  such  interst  upon  interest 
orders  signed  by  the  registered  holders  of  said 
bonds  until  there  shall  be  filed  with  said  Debt- 
or, or  its  fiscal  agent  (and  not  later  than  thirty 
(30)  days  prior  to  March  1st),  through 
whom  said  interest  is  customarily  paid,  the 
proper  certificates  claiming  exemption  from 
liability  for  said  tax  as  herein  provided,  exe- 
cuted as  follows: 

By  a citizen  or  resident  of  the  United 
States,  the  bona  fide  owner  of  the  regis- 
tered obligations,  who  may  claim  exemp- 
tion under  Paragraph  C,  Section  2,  of 
the  Federal  Income  Tax  Law,  or 

By  corporations,  joint  stock  companies,  as- 
sociations or  insurance  companies  organ- 
ized in  the  United  States,  or  organiza- 
tions, associations,  fraternities,  etc., 
which  are  either  taxable  or  exempt  from 
taxation,  as  provided  in  Paragraph  G, 
Subdivision  A,  of  the  Act,  or 

By  a bona  fide  resident  and  citizen  of  a 
foreign  country,  claiming  exemption  as 
such. 

Designation  of  Fiscal  Agencies 

The  “Debtor”  may  appoint  paying  or  fis- 
cal agents  to  act  for  it  in  matters  pertaining 
to  the  collection  of  this  tax,  upon  filing  with 
the  collector  of  internal  revenue  for  its  dis- 
trict a proper  notice  of  the  appointment  of 
such  agent  or  agents. 

Certificates  Claiming  Exemption 

If  the  owners  of  the  bonds  are  individuals, 
who  are  citizens  or  residents  of  the  United 
States,  the  aforesaid  certificates  shall  accom- 
pany the  coupons,  or,  with  respect  to  the  in- 
terest on  registered  bonds,  shall  be  filed  with 


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HARRIS  TRUST  £r  SAVINGS  BANK 


payer  of  said  interest,  and  such  certificates 
shall  describe  the  bonds  and  show  the  amount 
of  coupons  attached,  or  the  amount  of  inter- 
est due  such  owners  on  registered  bonds  and 
the  full  name  and  address  of  the  owners,  and 
shall  also  state  whether  they  claim,  or  do  not 
then  claim,  exemption  from  taxation  at  the 
source  provided  for  by  Paragraph  C,  of  Sec- 
tion II  of  the  Federal  Income  Tax  Law 
($3,000,  and  under  certain  conditions  $4,000) 
as  to  the  income  represented  by  such  coupons 
or  interest. 

The  certificate  shall  also  show  the  amount, 
if  any,  of  exemption  claimed  and  the  date  of 
signature. 

The  form  of  certificate  to  be  used  for  this 
purpose  shall  be  substantially  as  follows: 

Form  of  Certificate  to  be  Presented  with 

Coupons  or  Interest  Orders  Stating 
Whether  or  Not  Exemption  is 
Claimed  under  Paragraph  C , 
Section  2 , of  the  Federal 
Income  Tax  Law 

“I  do  solemnly  declare  that  I, , 

a citizen  or  resident  of  the  United  States,  and 

residing  at , 

am  the  owner  of  $ bonds  of  the  de- 
nominations of  $ each,  Nos./ 


of  the  

(Give  name  of  Debtor) 

known  as bonds, 

(Describe  the  particular  issue  of  bonds) 
from  which  were  detached  the  accompanying 
coupons,  due 191....,  amount- 
ing to  $ , or  upon  which  there  ma- 
tured  , 191....  $ 

of  registered  interest. 

I (do  ) now  claim  with  respect  to  the 
(do  not) 

income  represented  by  said  interest,  the  bene- 
fit of  a deduction  of  $ allowed  under 


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HARRIS  TRUST  Sr  SAVINGS  BANK 


Paragraph  C,  Section  II,  of  the  Federal  In- 
come Tax  Law,  the  total  exemption  to  which 
I am  entitled  thereunder  being 
$ 

Name 

Address 

Date , 191 

Whenever  interest  coupons  accompanied 
by  a certificate  of  an  individual  who  is  a 
citizen  or  resident  of  the  United  States,  as 
aforesaid,  are  presented  to  a Debtor  or  its  fis- 
cal agent  for  payment,  or  whenever  interest 
is  payable  to  such  individual  on  a bond  regis- 
tered as  to  both  principal  and  interest,  the 
Debtor  or  its  fiscal  agents  shall  deduct  and 
withhold  the  amount  of  the  normal  tax,  ex- 
cept to  the  extent  that  exemption  is  claimed  in 
the  certificate  of  ownership  in  the  form  here- 
in prescribed. 

Where  the  interest  to  be  paid  is  registered, 
the  same  form  of  certificate  shall  be  used 
where  exemptions  are  claimed,  except  that  it 
shall  be  filed  with  the  Debtor  at  least  five 
(5)  days  before  the  due  date  of  such  interest. 

By  Whom  Signed 

These  certificates  must  be  signed  by  the 
claimants  with  their  full  name,  and  contain 
their  postoffice  and  street  address,  also  the 
date  when  signed. 

Duly  authorized  agents,  trustees  acting  in 
a trust  capacity,  etc.,  may  sign  such  certifi- 
cates for  the  persons  for  whom  they  act. 

Organizations  Whose  Interest  Coupons  are 
not  Taxed  at  Source 

If  the  owners  of  the  bonds  are  corpora- 
tions, joint  stock  companies,  associations  or 
insurance  companies  organized  in  the  United 
States,  no  matter  how  created  or  organized, 
or  organizations,  associations,  fraternities, 
etc.,  which  are  either  taxable  or  exempt  from 
taxation  as  provided  in  Paragraph  G,  Subdi- 


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HARRIS  TRUST  &-  SAVINGS  BANK 


vision  A of  the  Act,  the  Debtor  is  not  re- 
quired to  withhold  or  deduct  the  tax  upon 
income  derived  from  interest  on  such  bonds, 
provided  coupons  or  orders  for  interest  from 
such  bonds  shall  be  accompanied  by  a certifi- 
cate of  the  owners  thereof  certifying  to  such 
ownership,  which  certificates  shall  be  filed 
with  the  debtor  when  such  coupons  or  interest 
orders  are  presented  for  payment. 

Such  certificates  shall  be  substantially  in 
the  following  form: 


Certificate  to  be  Furnished  by  Organiza- 
tions not  Subject  to  Tax  on 
Interest  at  Source 


“i, - 

(give  name) 

the of  the 

( give  official  position ) ( name  of  organization ) 

a of located  at 

( character  of  organization  ) ( state ) 

, do  solemnly  declare  that  said 

(postoffice  address) 

is  the  owner  of  $ 

(give  name  of  organization) 

bonds  of  the  denomination  of  $ each, 

Nos 


of  the 

(give  name  of  Debtor) 

known  as bonds, 

(describe  particular  issue  of  bonds) 
from  which  were  detached  the  accompanying 

coupons,  due 191...., 

amounting  to  $ , or  upon  which  there 

matured , 191....  $ 

of  registered  interest,  and  that  under  the  pro- 
visions of  the  Income  Tax  Law  of  October 
3,  1913,  said  interest  is  exempt  from  the  pav- 


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HARRIS  TRUST  Zr  SAVINGS  BANK 

ment  of  taxes  collectable  at  the  source,  which 
exemption  is  hereby  claimed. 

Name  

(official  position) 

of  

(name  of  organization) 

Date 191 Address 

(postoffice) 

This  certificate  must  be  signed  by  the  full 
name  of  the  organization,  stating  its  place  of 
business,  and  by  the  President,  Secretary,  or 
some  other  principal  officer  of  the  said  corpor- 
ation or  organization  duly  authorized  to  sign 
same,  together  with  the  date  of  execution.” 

How  Collected  when  not  Accompanied  by 
the  Certificate  of  Owner 

Where  coupons  or  interest  orders  are  not 
accompanied  by  the  ownership  certificates,  the 
form  to  be  executed  by  the  first  bank,  trust 
company,  banking  firm,  individual,  or  collec- 
tion agency  receiving  the  same  for  collection 
or  otherwise,  which  must  accompany  the  cou- 
pons or  interest  orders,  shall  be  substantially  as 
follows : 

Form  of  Certificate  to  be  Presented  with 
Coupons  or  Interest  Orders  when 
Not  Accompanied  by  Cer- 
tificate of  Owners 


I, , the 

(Name)  (Official  Position) 

of  the , of 


- (Bank  or  Collecting  Agency)  (Address) 

do  solemnly  declare  that  said 

(Collecting  Agency) 
has  (or  have)  purchased  or  accepted  for  col- 
lection the  accompanying  coupons  or  interest 


orders  amounting  to  $ , and  which 

represent  interest  matured  on  $ of 

bonds  of  the 


(Name  of  Debtor) 

8 


HARRIS  TRUST  SAVINGS  BANK 


and  that  re- 

collecting Agency) 

ceived  said  coupons  or  orders  for  registered 

interest  from 

(Name  of  party  from  whom  received) 

of , and  that  no  cer- 

( Address  of  said  party) 

tificate  of  ownership  accompanied  said  coupons 

or  interest  orders,  and 

(Collecting  agency) 

hereby  acknowledges  responsibility  of  with- 
holding therefrom  the  normal  income  tax  of 
1 per  cent,  in  accordance  with  the  regulations 
of  the  Treasury  Department. 

Name  

(Collecting  agency) 

By  

(Signature  of  officer  duly  authorized  to 
sign,  and  his  official  position) 

Address  

(Give  full  address) 

Date 191 

This  certificate  shall  be  dated  and  signed  by 
and  shall  state  the  address  of  the  corporation, 
organization,  collecting  agency,  or  person, 
withholding  the  tax,  with  full  name  and  ad- 
dress. 


Final  Disposition  of  Certificates 

The  Debtor,  or  paying  agents,  shall  deliver 
all  certificates,  with  the  list  of  names  and  ad- 
dresses of  those  for  whom  the  tax  has  been 
withheld,  showing  amounts,  as  required  by 
law,  to  the  Collector  of  Internal  Revenue  for 
their  district  on  or  before  the  20th  day  of  the 
month  succeeding  that  in  which  said  certifi- 
cates were  received  by  them. 

Interest  Due  Before  March  1,  1913 

The  tax  shall  not  be  withheld  on  coupons, 
or  registered  interest,  maturing  and  payable 


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HARRIS  TRUST  & SAVINGS  BANK 


before  March  1,  1913,  although  presented  for 
payment  at  a later  date. 

License  Required  for  Collection  of  Income 
from  Foreign  Countries 

11  persons,  firms  or  corporations  under- 
taking for  accommodation  or  profit  (this  in- 
cludes handling  either  by  way  of  purchase  or 
collection)  the  collection  of  coupons,  checks  or 
bii1  of  exchange,  etc.,  for  or  in  payment  of 
int  est  upon  bonds  issued  in  foreign  countries 
and  upon  foreign  mortgages  or  like  obliga- 
tio  s,  and  for  any  dividends  upon  stock  or 
int  est  upon  obligations  of  foreign  corpora- 
tion s,  associations,  or  insurance  companies  en- 
gaged in  business  in  foreign  countries,  are  re- 
quired by  law  to  obtain  a license  from  the 
Commissioner  of  Internal  Revenue  and  may 
be  required  to  give  bond  in  such  amount  and 
under  such  conditions  as  the  Commissioner 
of  Internal  Revenue  may  prescribe. 

By  Whom  Tax  is  Withheld 

The  licensed  person,  firm,  or  corporation 
first  receiving  any  such  foreign  items,  for  col- 
lection, or  otherwise,  shall  withhold  there- 
from the  normal  tax  of  one  per  cent,  and  will 
be  held  responsible  therefor.  He  (the  li- 
censee) shall  thereupon  endorse  or  stamp 
thereon  the  words  “ Income  Tax  Withheld 
by”  (giving  his  or  their  name,  address  and 
date),  which  shall  be  sufficient  evidence  to 
relieve  subsequent  holders  or  purchasers  from 
the  duty  of  also  withholding  the  income  tax. 

If  the  size  or  nature  of  such  coupons, 
checks,  etc.,  makes  it  impracticable  to  make 
said  endorsement  as  above,  a statement  identi- 
fying the  item  on  which  tax  is  withheld  and 
bearing  said  endorsement  may  be  attached 
thereto  with  the  same  effect  as  if  the  endorse- 
ment was  made  directly  thereon. 


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HARRIS  TKUST  &-  SAVINGS  BANK 


List  of  Tax  Collections  on  Foreign  Items 

Such  licensee  shall  obtain  the  names  and 
addresses  of  the  persons  from  whom  such 
items  are  received  and  shall  prepare  a list  of 
same  and  file  it  with  the  Collector  of  Inter- 
nal Revenue  for  his  district  not  later  than 
the  20th  of  the  month  next  succeeding  the  re- 
ceipt of  such  items.  The  list  shall  be  dated 
and  shall  contain  the  names  and  addresses  of 
the  taxable  persons  and  the  amount  of  tax 
deducted,  and  from  what  source  collected, 
livery  with  the  lists  aforesaid  to  the  Collector 


Certificates  to  Secure  Tax  Exemption  on 
Foreign  Items 

In  the  event  such  coupons,  checks,  or  bills 
of  exchange  above  mentioned,  are  presented  for 
collection  by  an  individual  claiming  the  bene- 
fit of  the  deductions  allowable  under  Para- 
graph C,  Section  II,  of  the  Federal  Income 
Tax  Law,  such  individual  shall  be  permitted 
to  avail  himself  of  the  deduction  claimed, 
upon  signing  on  the  form  heretofore  pre- 
scribed for  coupons  payable  in  the  United 
States,  and  no  tax  shall  be  deducted  for  the 
amount  of  the  exemption  so  claimed ; or  if 
such  items  are  presented  by  corporations,  joint 
stock  companies  or  associations  and  insurance 
companies,  organized  in  the  United  States,  the 
form  of  certificate  heretofore  prescribed  for 
such  organizations  shall  be  used,  and  in  such 
instances  no  tax  shall  be  deducted. 

In  both  instances,  the  licensee  first  receiving 
such  items  shall  retain  such  certificates  for  de- 
of  Internal  Revenue  for  his  district,  not  later 
than  the  20th  of  the  month  next  succeeding 
that  in  which  said  items  were  received,  and 
with  respect  to  said  coupons,  checks  or  bills  of 
exchange,  said  licensee  shall  attach  thereto 
(identifying  the  items)  or  endorse,  or  stamp 


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HARRIS  TRUST  dr  SAVINGS  BANK 


thereon  the  words  “Income  Tax  exemption 
claimed  through”  (giving  name  and  address 
of  licensee)  which  shall  be  sufficient  evidence 
to  relieve  subsequent  holders  or  purchasers 
from  the  duty  of  also  withholding  the  tax 
thereon. 

The  provisions  for  collection  of  the  tax  on 
foreign  obligations  set  forth  in  this  section  of 
the  regulations,  includes  the  interest  upon  all 
foreign  bonds,  even  though  the  coupons  may 
be  at  the  option  of  the  holder,  payable  in  the 
United  States  as  well  as  in  some  foreign 
country. 

Accurate  Record  to  be  Kept  by  Licensees 

All  persons  licensed  shall  keep  their  records 
in  such  manner  as  to  show  from  whom  every 
such  item  has  been  received,  and  such  records 
shall  be  open  at  all  times  to  the  inspection  of 
Internal  Revenue  officers. 

Penalty  for  Omission  to  Obtain  License 

Failure  to  obtain  license  or  to  comply  with 
regulations  is  punishable  by  a fine  not  ex- 
ceeding $5,000,  or  imprisonment  not  exceed- 
ing one  year  or  both , in  the  discretion  of  the 
court.  Such  licenses  shall  continue  in  force 
until  revoked. 

Application  for  such  licenses  should  be  made 
to  the  Collectors  of  Internal  Revenue  for  the 
district  in  which  they  are  engaged  in  business, 
and  may  be  issued  without  cost  to  such  per- 
sons as  the  Commissioner  may  approve,  upon 
their  filing  with  the  Collector  the  bond  herein 
provided  for. 

All  persons  in  making  application  to  the 
Collector  of  Internal  Revenue  for  such  li- 
censes, shall  register  their  names  and  addresses 
and  state  the  nature  of  the  business  in  which 
they  are  engaged.  Such  application  for  the 
license,  accompanied  by  a proper  surety  bond, 


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HARRIS  TRUST  dr  SAVINGS  BANK 


when  both  have  been  approved  by  the  Col- 
lector, will  be  considered  a sufficient  compli- 
ance with  the  law  to  enable  the  persons  mak- 
ing application  to  do  business  until  February 
1,  1914,  without  incurring  the  penalties  pro- 
vided by  law  for  failure  to  procure  the  re- 
quired license. 

Penalty  for  False  Statements 

If  any  person , for  the  purpose  of  obtaining 
any  allowance  or  reduction  by  virtue  of  a 
claim  for  exemption , either  for  himself  or  for 
any  other,  knowingly  makes  a false  statement 
or  false  or  fraudulent  representation,  he  is  lia- 
ble under  the  Act  to  severe  penalties. 

Partnerships 

Where  coupons  or  interest  orders,  presented 
for  payment,  represent  the  interest  on  bonds, 
or  other  similar  obligations,  owned  by  a part- 
nership, they  shall  be  accompanied  by  a cer- 
tificate of  ownership,  which  shall  be  signed 
either  in  the  firm’s  name  by  one  member 
of  the  firm  or  by  each  individual  member  of 
the  partnership,  and  the  normal  tax  shall  be 
withheld  by  the  debtor  with  respect  to  the 
income  represented  by  said  interest. 

Said  certificate  of  ownership  shall  be  in 
substantially  the  following  form: 

Form  of  Certificate  to  be  Filled  Out  and 
Signed  by  Members  of  Partnerships 

The  following  certificate  should  be  used 
when  coupons  or  interest  orders  are  presented 
by  citizens  or  residents  of  the  United  States 
for  collection  of  interest  on  bonds,  or  other 
similar  obligations,  owned  by  the  partnerships 
of  which  they  are  members: 

I, a member  of  the 

firm  or  partnership  of 

of , and  residing  at 

(Give  full  address),  do  solemnly  declare  that 


13 


HARRIS  TRUST  £r  SAVINGS  BANK 


the  said  partnership  is  the  owner  of  $ 

bonds  of  the  denomination  of each, 


Nos of  the 

(Give  name  of  debtor) 

known  as bonds,  from 

(Describe  the  particular  issue  of  bonds 
which  were  detached  the  accompanying  interest 

coupons,  due 191....,  amounting 

to  $ , or  upon  which  there 

matured 191 , $ 


of  registered  interest,  and  that  the  name  and 
address  of  said  firm  or  partnership,  and  the 
names  of  the  individual  members  thereof,  and 
their  places  of  residence,  are  as  follows: 
NAMES  OF  PARTNERS  ADDRESS 


Name  of  partner  signing 

Of  firm  of 

Address 

Date 191  — 

Any  member  of  a partnership,  who  is  entitled 
to  a deduction  (under  Paragraph  C,  Section 
II,  of  the  Income  Tax  Law)  of  his  pro  rata 
share  of  the  tax  which  may  be  withheld  at 
the  source  on  interest  on  bonds  owned  by  his 
copartnership,  as  above,  may  claim  such  deduc- 
tion or  allowance  when  he  shall  make  his  indi- 
vidual income  tax  return  for  the  year  in  which 
said  deduction  at  the  source  was  made. 

Non-Resident  Foreigners  Owning  Interest 
Bearing  Bonds  not  Subject  to  Taxation 
on  Income  from  Such  Bonds  if 
Proper  Certificate  Furnished 

This  tax  will  not  be  deducted  from  the  in- 
come which  may  be  derived  from  interest  on 
bonds,  mortgages,  equipment  trusts,  receivers’ 
certificates,  or  other  similar  obligations  of 
which  the  bona  fide  owners  are  citizens  of  for- 


14 


HARRIS  TRUST  Zr  SAVINGS  BANK 


eign  countries  residing  in  foreign  countries: 
Provided , that  such  interest  coupons  or  in 
case  of  wholly  registered  bonds,  the  orders 
for  the  payment  of  such  interest,  shall  be 
accompanied  by  duly  certified  certificates  here- 
inafter provided  for  to  cover  the  cases  of  for- 
eign and  non-resident  owners  of  bonds  and 
other  securities.  , 

Unless  such  proof  of  foreign  ownership  is 
duly  furnished,  the  normal  tax  of  1 per  cent 
shall  be  deducted  as  herein  provided. 

Such  certificate  shall  be  in  substantially  the 
following  form: 

Form  of  Certificate  to  be  Presented  with 
Coupons  or  Interest  Orders , Detached 
from  Bonds  or  Other  Obligations 
Owned  by  Those  who  are  Both 
Citizens  or  Subjects , and 
Residents  of  Foreign 
Countries 

“I  do  solemnly  declare  that  I am  not  a citi- 
zen or  resident  of  the  United  States  of  Amer- 
ica, but  a subject  (or  citizen)  of 

and  the  owner  of  $ bonds  of  the 

denominations  of  $ each,  Nos 


of  the , known  as 

(give  name  of  Debtor  corporation) 

bonds, 

(describe  the  particular  issue  of  bonds) 
from  which  were  detached  the  accompanying 

coupons,  due , 191...., 

amounting  to  $ , or  upon  which 

there  matured  ,191...., 

$ , of  registered  interest,  and  that  be- 

ing a non-resident  foreigner,  I am  exempt 
from  the  income  tax  imposed  on  such  interest 
by  the  United  States  Government  under  the 
law  enacted  October  3,  1913,  and  that  no  citi- 
zen of  the  United  States,  wherever  residing, 
or  foreigners  residing  in  the  United  States, 
or  any  of  its  possessions,  has  any  interest  in 


15 


HARRIS  TRUST  SAVINGS  BANK 


said  bonds,  coupons,  or  interest. 

Signature  of 

Owner  of  bonds 

(Give  full  name) 

Address 

(Give  full  postoffice  address) 
Date 191  — 

Temporary  Provision 

In  view  of  the  fact  that  the  time  required 
for  the  interpretation  of  the  law  and  prepara- 
tion and  issuance  of  these  regulations  brings 
the  date  so  near  November  first,  and  that 
many  coupons  payable  upon  that  date  are  al- 
ready in  transit  without  the  prescribed  cer- 
tificates attached,  with  a desire  to  cause  as 
small  an  amount  of  inconvenience  as  possible 
to  bondholders  and  general  business  as  may  be 
compatible  with  the  provisions  of  the  law  and 
of  these  regulations,  the  following  tempor- 
ary provision  is  made: 

On  November  1,  1913,  and  for  fifteen  days 
thereafter,  coupons  presented  to  a Debtor  need 
not  be  accompanied  by  certificates  in  any  of 
the  forms  hereinbefore  described,  provided 
that  such  coupons  are  accompanied  by  a cer- 
tificate substantially  in  the  following  form: 

Form  of  Temporary  Certificates  Which  may 
be  Used  Only  Prior  to  November  16 , 
1913 , Subject  to  Substitution 

I (we)  hereby  certify  that  I am  (we  are) 
lawfully  entitled  to  present  for  payment  the 
accompanying  coupons  or  interest  orders 

amounting  to  $ (giving  amount) 

representing  interest  matured  on  the  following 

bonds (giving  name  of  debtor 

and  designating  the  description,  style,  and 
numbers  of  the  bonds)  ; that  said  coupons  or 
interest  orders  came  into  my  (our)  possession 
unaccompanied  by  a certificate  of  ownership 
of  said  bonds,  in  any  of  the  forms  required  by 


16 


HARRIS  TRUST  6-  SAVINGS  BANK 


the  regulations  of  the  United  States  Treasury 
Department;  and  that  the  name  and  address 
of  the  owner  of  such  bonds  are  as  follows: 

(give  name  and  address  of 

owner;  if  impossible  to  do  this,  so  state). 
Name  of  person,  firm,  or  corporation  present- 
ing coupons:  

Address 

On  or  before  February  1,  1914,  certificates 
of  the  ownership  of  any  of  the  bonds  upon 
which  was  collected  the  interest  referred  to 
in  such  temporary  certificates,  in  any  of  the 
forms  above  set  forth,  may  be  delivered  to  the 
debtor;  and  said  debtor  may  thereupon  return 
any  sum  withheld  to  which  the  owner  of  such 
bonds  may  be  entitled  under  the  law  and  regu- 
lations upon  the  facts  disclosed  by  such  owner- 
ship certificates.  Any  temporary  certificates 
relating  to  bonds,  for  which  certificates  of 
ownership  shall  not  have  been  substituted  with 
the  Debtor,  shall,  on  or  before  March  1,  1914, 
be  delivered  to  the  collector  of  internal 
revenue. 

All  forms  of  certificates  herein  provided 
for  shall  be  8 inches  wide  and  3*4  inches  from 
top  to  bottom,  and  printed  on  paper  corre- 
sponding in  weight  and  texture  to  glazed  bond 
paper  17  by  28,  about  26  pounds  to  the  ream 
of  500  sheets,  or  white  writing  paper  21  by  32, 
about  32  pounds  to  the  ream  of  500  sheets, 
and  the  person  or  corporation  first  receiving 
coupons  for  collection  shall  write  or  stamp  his 
or  its  name  and  address  and  date  on  the  back 
of  said  certificates. 

W.  H.  Osborn, 

Commissioner  of  Internal  Revenue. 

Approved  October  25,  1913. 

W.  G.  McAdoo, 

Secretary  of  the  Treasury. 


17 


Internal  Revenue 
Regulations 

II 


KEGARDING  THE  DEDUCTION 
OF  THE  INCOME  TAX  AT 
THE  SOURCE  ON  INCOME 

OTHER  THAN 

INTEREST  MATURING  ON  BONDS,  NOTES 
AND  OTHER  SIMILAR  OBLIGATIONS  OF 
CORPORATIONS,  JOINT  STOCK 
COMPANIES,  OK  ASSOCIATIONS  AND 
INSUKANCE  COMPANIES,  UNDER 
THE  PROVISIONS  OF  SECTION  II 
OF  THE  ACT  OF  OCTOBER  3,  1913, 


REPKINTED  AS  ISSUED 
BY  THE  INTERNAL  REVENUE 
DEPARTMENT, 
OCTOBEK  31,  1913 


( 


V 


HARRIS  TRUST  €r  SAVINGS  BANK 


By  Whom  the  Normal  Tax  Shall  be  Deduct =■ 
ed  and  Withheld 

The  “source”  in  these  regulations  shall  be 
construed  as  referring  to  the  place  where  the 
income  originates. 

All  persons,  firms,  etc.,  mentioned  in  para- 
graph E of  this  law,  hereinafter  referred  to 
either  as  “Debtors”  or  “withholding  agents,” 
namely: 

Copartnerships,  companies,  corporations, 
joint-stock  companies,  or  associations,  in- 
surance companies,  in  whatever  capacity 
acting,  including  lessees,  mortgagors  of  real 
or  personal  property,  trustees  acting  in  any 
trust  capacity,  executors,  administrators, 
agents,  receivers,  conservators,  employers 
and  all  officers  and  employes  of  the  United 
States  having  the  control,  receipt,  custody, 

• disposal,  or  payment  of  interest  (except 
income  derived  from  interest  upon  bonds 
and  mortgages  or  deeds  of  trust,  or  other 
similar  obligations  of  corporations  upon 
which  the  normal  tax  of  1 per  cent  has 
otherwise  been  withheld  at  the  source,  as 
provided  by  these  regulations) , rents,  sal- 
aries, wages,  royalties,  taxable  annuities, 
emoluments,  or  other  fixed  or  determina- 
ble gains,  profits,  and  income  of  another 
person,  exceeding  $3,000  for  any  taxable 
year,  except  as  hereinafter  provided, 
shall  deduct  and  withhold  from  such  annual 
gains,  profits,  and  income  such  sum  as  will  be 
sufficient  to  pay  the  normal  tax  of  1 per  cent 
imposed  thereon  by  section  2 of  this  act,  and 
shall  make  lawful  return  and  pay  the  taxes 
so  withheld  to  the  collector  of  internal  reve- 
nue for  the  district  in  which  said  withholding 
agent  resides  or  has  his,  her,  or  its  principal 
place  of  business. 

The  normal  tax  of  1 per  cent  shall  be  thus 
withheld  from  all  income  derived  from  fixed 


21 


HARRIS  TRUST  &■  SAVINGS  BANK 


annual  periodical  rent  of  realty  or  personalty, 
interest  (except  as  herein  otherwise  provid- 
ed), salaries,  royalties,  taxable  annuities,  and 
other  fixed  annual  periodical  income  exceed- 
ing $3,000. 

Items  Upon  Which  Tax  is  not  to  be  With- 
held at  the  Source 

( 1 ) Dividends  on  capital  stock,  or  from 
the  net  earnings  of  corporations  and  joint- 
stock  companies  or  associations  and  insurance 
companies  subject  to  like  tax,  when  said  with- 
holding agents  are  required  to  make  and  ren- 
der a return  in  behalf  of  another,  as  provided 
herein,  to  the  collector  of  his,  her,  or  its  dis- 
trict. 

(2)  Proceeds  of  life  insurance  policies  paid 
upon  the  death  of  the  person  insured,  or  pay- 
ments made  by  or  credited  to  the  insured,  on 
life  insurance,  endowment,  or  annuity  con- 
tracts, upon  the  return  thereof  to  the  insured 
at  the  maturity  of  the  term  mentioned  in  the 
contract,  or  upon  the  surrender  of  contract — 
all  of  which  shall  not  be  included  as  income 
under  this  law — but  this  shall  not  be  con- 
strued to  exempt  said  insurance  companies 
from  withholding  and  paying  the  normal  tax 
of  1 per  cent  on  interest  income  paid  by  in- 
surance companies  to  beneficiaries  of  policies 
when  said  interest  exceeds  $3,000. 

(3)  Income  of  an  individual  which  is  not 
fixed  or  certain,  and  payable  at  stated  periods, 
or  is  indefinite  or  irregular  as  to  amount  or 
time  of  accrual,  shall  not  be  withheld  at  the 
source,  but  shall  be  returned,  and  the  tax 
shall  be  paid  thereon  by  the  individual. 

Income  derived  from  the  following  pro- 
fessions and  vocations  come  under  this 
head : Farmers,  merchants,  agents  com- 
pensated on  the  commission  basis,  lawyers, 
doctors,  authors,  inventors,  and  other  pro- 
fessional persons. 


22 


HARRIS  TRUST  & SAVINGS  BANK 


Such  persons  shall  make  personal  return 
of  all  their  income,  provided  their  total  in- 
come from  all  sources  exceeds  $3,000.  For 
example:  When  a lawyer  receives  a re- 
tainer of  $5,000  as  a special  fee,  a deduc- 
tion therefrom  shall  not  be  made  by  the 
payer,  but  when  a lawyer  receives  a re- 
tainer of  $5,000  per  annum,  and  the  ex- 
emption claimed  is  $3,000,  $2,000  of  such 
income  would  be  taxed  and  the  tax  re- 
tained at  the  source,  or  if  his  exemption 
claimed  should  be  $4,000,  $1,000  of  such 
income  would  be  taxed  and  the  tax  there- 
on withheld  at  the  source. 

(4)  The  value  of  property  acquired  by 
gift,  bequest,  devise,  or  descent. 

v(5)  Interest  upon  the  obligations  of  a 
State  or  any  political  subdivision  thereof,  and 
upon  the  obligations  of  the  United  States  or 
its  possessions;  also  the  compensation  of  the 
present  President  of  the  United  States  during 
the  term  for  which  he  has  been  elected,  and  of 
the  judges  of  the  Supreme  and  inferior  courts 
of  the  United  States  now  in  office,  and  the 
compensation  of  all  officers  and  employes  of 
a State  or  any  political  subdivision  thereof 
paid  by  a State  or  any  political  subdivision 
thereof,  except  when  such  compensation  is 
paid  by  the  United  States  Government. 

This  exempts  from  the  income  tax  all  sala- 
ries paid  to  an  individual  by  a State  or  any 
political  subdivision  thereof,  including  the 
salaries  of  State,  county,  and  municipal  offi- 
cers, the  salaries  of  public-school  teachers,  and 
special  compensation  paid  by  States  or  sub- 
divisions thereof  for  professional  services, 
whether  in  the  shape  of  salaries  or  special  fees. 

Normal  Tax  on  the  Same  Income  is  to  be 
Withheld  but  Once 

The  normal  tax  of  1 per  cent  shall  be  de- 
ducted and  withheld  at  the  source , and  pay- 


23 


HARRIS  TRUST  6-  SAVINGS  BANK 


ment  made  to  the  Collector  of  Internal  Reve- 
nue as  provided  in  the  law,  by  the  Debtor  or 
his,  her,  or  its  duly  appointed  agent  author- 
ized to  make  such  deduction  and  payment. 

No  other  person,  firm,  or  organization,  in 
whatever  capacity  acting,  having  the  receipt, 
custody,  or  disposal  of  any  income,  as  herein 
provided,  shall  be  required  to  again  deduct 
and  withhold  the  normal  tax  of  1 per  cent 
thereon : Provided That  any  person,  firm  or 
organization  in  whatever  capacity  acting,  oth- 
er than  the  Debtor  who  has  withheld  said  tax, 
shall  file  with  the  Collector  of  Internal  Reve- 
nue for  his,  her,  or  its  district,  a certificate  in 
substantially  the  following  form: 

Form  of  Certificate  to  be  filed  by  persons , 
firmSj  or  organizations  required  to  with- 
hold and  pay  said  tax  other  than  the 
Debtor  at  the  source . 


(Name  of  collector  of  internal  revenue) 

Collector  of  Internal  Revenue 


(Give  address  and  designate  district) 

I, 

(Name) 


of  the  .... 

(Official  title  if  any) 

(Person,  firm,  or  organization) 

of...: 

(Capacity  in  which  acting) 

(Post-office  address) 

do  solemnly  declare  that  I (we)  received  of 

$ , 

(Name  from  whom  received) 

same  being  income  derived  from 

(State  source,  whether  rents,  salary,  or  other  sources) 

belonging  to , 

(Give  name  of  person  to  whom  income  is  due) 
(Address) 

and  that  the  tax  thereon  amounting  to  $ , 

to  which  said  person  is  subject,  has  been  with- 


24 


HARRIS  TRUST  &■  SAVINGS  BANK 


held  at  the  source  of  said  income  by. 


(Name  of  person  withholding) 


(Post-office  address) 

(Signed)  

Address 

(Street  and  number) 


(City  and  State) 

Date: , 191™ 

Exemptions  Which  May  be  Claimed  by 
Individuals 

Any  person  subject  to  the  normal  tax  of  1 
per  cent,  the  amount  of  which  is  withheld  or 
is  to  be  withheld  at  the  source,  wishing  to 
avail  himself  or  herself  of  the  exemption  pro- 
vided in  paragraph  C,  section  2,  of  this  act 
($3,000  or  $4,000,  as  the  case  may  be)  must 
file  with  the  withholding  agent,  not  later  than 
30  days  prior  to  the  day  on  which  the  return 
on  his  income  is  due,  a notice  in  the  following 
form: 

Form  for  claiming  exemption  at  the  source  as 
provided  in  paragraph  C , section  2 , of  the 
Federal  income-tax  law  of  October  3, 

To 

(Give  name  of  withholding  agent) 

(Post-office  address) 

I hereby  serve  you  with  notice  that  I 


am  single — married  and  living  with  my  wife 

(Strike  out  so  as  to  show  status  correctly) 

— husband , and  now  claim  the  benefit  of  the 
exemption  of  $ , as  allowed  in  para- 

graphs C and  D of  section  2 of  the  Federal 
income-tax  law  of  October  3,  1913  (my  to- 
tal exemption  under  said  paragraphs  being 
$ )• 

Signed : „ , 

Address: , 

(Street  and  number) 


(City  and  State) 

Date: , 191 


25 


HARRIS  TRUST  dr  SAVINGS  BANK 


By  Whom  Exemptions  Under  Paragraph  C, 
Section  2 , of  this  Act,  may  be 
Claimed 

Every  single  person,  or  every  married  per- 
son not  living  with  wife  or  husband,  who  is 
liable  for  the  normal  income  tax  under  this 
law  may  claim  a total  deduction  of  $3,000 
from  net  income,  on  which  deduction  he  or 
she  is  exempt  from  said  normal  tax  of  1 per 
cent. 

Where  a husband  and  wife  live  together 
and  only  one  of  them  has  an  annual  income 
liable  for  the  normal  tax  of  1 per  cent,  then 
the  husband  or  wife  who  has  the  income  shall 
make  the  return  and  pay  the  said  tax  and 
may  claim  and  deduct  an  exemption  of  $4,000. 

But  if  a husband  and  wife  live  together  and 
each  has  an  annual  income  liable  for  the  nor- 
mal tax  of  1 per  cent,  then  in  that  event  they 
shall  make  a separate  return,  and  the  $4,000 
exemption  allowed  to  a husband  and  a wife 
when  living  together  may  be  claimed  and  de- 
ducted by  either  the  husband  or  wife,  as  they 
may  mutually  agree  (but  not  by  both  sepa- 
rately), or  the  said  exemption  shall  be  pro- 
rated between  them  in  proportion  to  their 
net  income. 

Amount  of  Exemption  Allowable  for  1913 

Under  Paragraph  C,  Section  2,  of  the 
Federal  Income-Tax  Law 

For  the  present  year  of  1913  (from  March 
1 to  December  31)  exemption  allowed  under 
paragraph  C of  this  law  shall  be  five-sixths  of 
those  of  the  calendar  year,  as  specified  in 
paragraph  D,  namely,  $2,500  if  the  exemption 
is  $3,000,  or  $3,333.33  if  the  exemption  is 
$4,000,  as  the  case  may  be. 

When  and  on  What  Amount  the  Normal 
Tax  of  1 Per  Cent  Shall  be 
Withheld 

A withholding  agent  who  pays  monthly  or 
periodically  during  the  year  interest  (except 


26 


HARRIS  TRUST  dr  SAVINGS  BANK 


income  derived  from  interest  upon  bonds  and 
mortgages,  or  deeds  of  trust,  or  other  similar 
obligations  of  corporations,  etc.,  upon  which 
the  normal  tax  of  1 per  cent  has  been  withheld 
at  the  source,  as  provided  by  regulations), 
rents,  salaries,  wages,  etc.,  shall  not  withhold 
the  said  tax  until  such  time  as  the  rents,  sal- 
aries, wages,  etc.,  shall  have  reached  an  aggre- 
gate amount  in  excess  of  $3,000.  When  such 
amount  has  been  reached  he,  she,  or  it  shall 
withhold  the  tax  on  the  whole  $3,000  and 
excess  thereof,  unless  the  person  to  whom  the 
income  is  due  files  with  him,  her,  or  it  the 
notice  above  provided,  claiming  exemption 
under  paragraph  C of  section  2 of  this  act,  in 
which  case  the  withholding  agent  shall  with- 
hold only  the  tax  on  the  income  in  excess  of 
said  exemption  of  $3,000  or  $4,000  (as  the 
case  may  be),  and  the  tax  so  withheld  shall 
be  returned  and  paid  as  required  by  law. 

Deductions  to  be  Made  in  Computing  Net 
Income 

Any  person  subject  to  the  normal  income 
tax  of  1 per  cent,  a part  of  whose  income  is 
withheld  or  is  to  be  withheld  at  the  source, 
who  may  wish  to  avail  himself  of  the  deduc- 
tions authorized  in  subsection  B,  section  2,  of 
this  act,  may  file  either  with  the  Collector  of 
Internal  Revenue  for  the  district  in  which 
return  is  made  for  him,  or  with  the  withhold- 
ing agent,  not  later  than  30  days  prior  to 
March  1,  a return  and  notice  in  substantially 
the  following  form : 

Form  No 

UNITED  STATES  INTERNAL 
REVENUE. 

Return  making  application  for  deduc- 
tions, as  provided  by  paragraphs  B and  E, 
section  2 of  the  Federal  Income  Tax  Law  of 
October  3,  1913. 


27 


HARRIS  TRUST  &•  SAVINGS  BANK 


To 


(Name  of  withholding  agent) 


(Street  and  number) 


(Town  or  city)  (State) 

I  hereby  solemnly  declare  that  the  follow- 
ing is  a true  and  correct  return  of  my  gains, 
profits,  and  income  from  all  other  sources  for 

the  calendar  year  ended  December  31,  191 

( from  March  1 to  December  31  for  the  year 
1913),  and  a true  and  correct  return  of  de- 
ductions asked  for  under  paragraph  B of  sec- 
tion 2 of  the  act  of  October  3,  1913,  and  I 
hereby  claim  deductions  as  shown  below. 


Amount  of  gains,  profits,  interest,  rents, 
royalties,  profits  from  co-partnerships, 
and  income  from  all  other  sources 
whatsoever  $. 


DEDUCTIONS. 

1 The  amount  of  necessary  ex- 

penses actually  paid  in  carrying 
on  business,  except  business  ex- 
penses of  partnerships,  and  not 
including  personal,  living  or 
family  expenses $. 

2 All  interest  paid  within  the 

year  on  personal  indebtedness 
of  taxpayer  $. 

3 All  national,  state,  county, 

school,  and  municipal  taxes  paid 
within  the  year  (not  including 
those  assessed  against  local 
benefits)  $. 

4 Losses  actually  sustained  dur- 

ing the  year  incurred  in  trade 
or  arising  from  fires,  storms,  or 
shipwreck  and  not  compensat- 
ed for  by  insurance  or  other- 
wise   $ 

5 Debts  due,  which  have  been 

actually  ascertained  to  be 
worthless  and  charged  off  with- 
in the  year $. 


28 


HARRIS  TRUST  SAVINGS  BANK 


6 Amount  representing  a reason- 

able allowance  for  the  exhaus- 
tion, wear,  and  tear  of  property 
arising  out  of  its  use  or  employ- 
ment in  the  business,  not  to  ex- 
ceed in  the  case  of  mines  5 per 
cent  of  the  gross  value  of  the 
output  for  the  year  for  which 
computation  is  made,  but  not 
including  the  expense  of  restor- 
ing property  or  making  good 
the  exhaustion  thereof,  for 
which  an  allowance  is  or  has 
been  made $ 

7 The  amount  received  as  divi- 
dends upon  the  stock  or  from 
the  net  earnings  of  any  corpora- 
tion, joint-stock  company,  as- 
sociation, or  insurance  com- 
pany which  is  taxable  upon  its 

net  income  $ 

8 The  amount  of  income,  the  tax 

upon  which  has  been  paid  or 
withheld  for  payment  at  the 
source  of  income  $ 

$. 

Total  deductions  $. 

Date , 191 

(Signed)  

Address  


NOTE. — Money  or  other  things  of  value,  disposed  of 
by  gift,  donation,,  or  endowment,  shall  not  be  deducted 
or  be  made  the  basis  for  a deduction  from  the  income  of 
persons  or  corporations  in  their  tax  returns  under  the 
income-tax  law. 


Money  or  other  things  of  value,  disposed 
of  by  gift,  donation,  or  endowment,  shall  not 
be  deducted  or  be  made  the  basis  for  a deduc- 
tion from  the  income  of  persons  or  corpora- 
tions in  their  tax  returns  under  the  income- 
tax  law. 


29 


HARRIS  TRUST  & SAVINGS  BANK 


Amount  of  Deduction  Allowable  for  1913 
According  to  Paragraphs  B and  D 
of  Section  2 of  this  Act 

For  the  present  year  of  1913  (from  March 
1 to  December  31)  the  deductions  allowed 
under  paragraph  B shall  be  five-sixths  of  the 
deductions  allowable  for  a calendar  year,  as 
specified  in  paragraph  D of  this  law. 

Amount  of  Tax  to  be  Withheld  for  1913 , 
and  When  Withheld 

The  withholding  agent  is  not  required  to 
deduct  and  withhold  prior  to  November  1, 
1913,  the  normal  tax  of  1 per  cent  for  which 
an  individual  is  liable. 

Whenever  the  total  amount  of  income  paid 
to  any  person  by  a withholding  agent  after 
October  31,  1913,  shall  be  in  excess  of  $3,000, 
then,  in  that  event,  the  withholding  agent 
shall  be  liable  for  and  shall  deduct  and  with- 
hold the  tax  on  such  amount,  unless  such  per- 
son shall  file  a claim  for  an  exemption  as  al- 
lowed in  paragraph  D of  this  act,  the  amount 
of  exemption  allowable  being  $2,500  if  the 
annual  exemption  is  $3,000,  or  $3,333.33  if 
the  annual  exemption  is  $4,000,  as  the  case 
may  be. 

Persons  Physically  Unable  to  Make  Returns 

If  a person  subject  to  said  tax,  part  of 
whose  income  is  withheld  or  is  to  be  withheld, 
is  a minor  or  insane  person,  or  is  absent  from 
the  United  States,  or  unable  to  make  the  ap- 
plication or  return  because  of  serious  illness, 
the  application  or  return  may  be  made  by  the 
withholding  agent,  who  shall  make  the  follow- 
ing oath  under  the  penalties  of  this  act: 

Form  of  oath  required  of  a withholding  agent 
when  acting  for  another  in  filing  return  and 
making  application  for  deductions  allowable 

30 


HARRIS  TRUST  6-  SAVINGS  BANK 


under  paragraph  B,  as  provided  in  paragraph 
E}  section  2,  of  the  Federal  income-tax  law 
of  October  3,  1913* 

I hereby  swear  (or  affirm)  that  I have  suf- 
ficient knowledge  of  the  affairs  and  property 
of  , 

(Naming  person  and  address  for  whom  acting) 

to  enable  me  to  make  a full  and  complete  re- 
turn for , and 

(Naming  person) 

that  the  return  of  income  and  application  for 
deductions  made  by  me  are  true  and  accurate. 
Signed  

Address 

(Street  and  number) 

(City  and  State) 

Date: , 191.... 

Signed  and  sworn  to  before 

, 191— - 


Penalties 

Subsection  F of  section  2 of  the  income-tax 
law  provides  inter  alia  as  follows: 

Any  person  or  any  officer  of  any  corporation 
required  by  law  to  make , render,  sign,  or 
verify  any  return  who  makes  any  false  or 
fraudulent  return  or  statement  with  intent  to 
defeat  or  evade  the  assessment  required  to  be 
made  shall  be  guilty  of  a misdemeanor  and 
shall  be  fined  not  exceeding  $2,000  01  be  im- 
prisoned not  exceeding  one  year,  or  both,  in 
the  discretion  of  the  court,  with  the  costs  of 
prosecution. 

W.  H.  Osborne, 

Commissioner  of  Internal  Revenue. 
Approved  October  31,  1913. 

W.  G.  McAdoo, 

Secretary  of  the  Treasury. 


31 


NTEKNAL 


EVENUE 


EGULATIONS 


III 


HARRIS  TRUST  dr  SAVINGS  BANK 


(T.  D.  1893) 

Income  Tax  on  the  Interest  on  Bank  Depos= 
its  and  Bank  Certificates  of  Deposit 
Not  to  be  Withheld  at  the  Source 

Washington,  D.  C.,  Nov.  6,  1913. 

To  Collectors  of  Internal  Revenue : 

Banks,  Bankers,  Trust  Companies,  and 
other  banking  institutions  receiving  deposits 
of  money,  are  NOT  REQUIRED  under  the 
Treasury  Regulations  (part  2),  approved  Oc- 
tober 31,  1913,  to  withhold  at  the  source  the 
normal  income  tax  of  one  per  cent  on  the  in- 
terest paid,  or  accrued  or  accruing  to  deposit- 
ors, whether  on  open  accounts  or  on  Certifi- 
cates of  Deposit ; but  all  such  interest,  whether 
paid , or  accrued  and  not  paid , must  be  included 
in  his  tax  return  by  the  person  or  persons  en- 
titled to  receive  such  interest,  whether  on  open 
account  or  on  the  Certificate  of  Deposit. 

W.  H.  Osborn, 
Commissioner  of  Internal  Revenue, 

Approved : 

W.  G.  McAdoo, 

Secretary  of  the  Treasury, 


(T.  D.  1892 ) 

Interest  upon  Obligations  of  the  United 
States  or  its  Possessions , or  of  any 
State , County , City  or  any  other 
Political  Subdivision  there= 
off  is  not  Subject  to 
Income  Tax 

Washington,  D.  C.,  Nov.  6,  1913. 

To  Collectors  of  Internal  Revenue : 

It  has  been  called  to  the  attention  of  this 
office  that  banks  in  certain  sections  are  refusing 
to  pay  coupons  for  interest  on  bonds  of  States, 
counties,  cities,  or  other  political  subdivisions 
of  the  United  States,  when  such  coupons  are 


35 


HARRIS  TRUST  &■  SAVINGS  BANK 


not  accompanied  by  certificates  of  ownership, 
without  deducting  the  normal  income  tax  of 
one  per  cent,  which  the  law  and  the  regula- 
tions of  this  Department  require  shall  be  de- 
ducted at  the  source  in  paying  the  interest  on 
bonds  of  corporations,  joint  stock  companies, 
or  associations  and  insurance  companies. 

Please  inform  all  parties  interested,  giving 
the  information  wide  publicity,  that  the  in- 
come derived  from  the  interest  upon  the  obli- 
gations of  a State,  county,  city,  or  any  other 
political  subdivision  thereof,  and  upon  the  ob- 
ligations of  the  United  States  or  its  possessions, 
is  not  subject  to  the  income  tax , and  a certifi- 
cate of  ownership  in  connection  with  the  cou- 
pons or  registered  interest  orders  for  such 
interest  will  not  be  required. 

The  interest  coupons  should  clearly  show  on 
their  face  whether  they  are  issued  by  the 
United  States  or  any  political  subdivision  there- 
of. If,  however,  they  do  not  clearly  show 
this,  then  of  course,  an  ownership  certificate 
should  be  required. 

Respectfully, 

W.  H.  Osborn, 
Commissioner . 


(T.  D.  1891) 

Income  Tax  on  Notes  Given 
for  Interest  Rents,  etc . 

How  Tax  shall  be  Collected  when  such  Notes , 
before  their  Maturity , shall  have  been 
Sold  by  the  Payee  or  Recipient , 
or  shall  have  been  Discount = 
ed  with  Banks 

Washington,  D.  C.,  November  3,  1913. 

To  Collectors  of  Internal  Revenue : 

When  a note  shall  have  been  given  in  pay- 
ment of  interest,  rents,  or  other  income  accru-  * 
ing  after  March  1,  1913,  and  said  note  ma- 


36 


HARRIS  TRUST  &-  SAVINGS  BANK 


tures  on  or  after  November  1,  1913,  the  maker 
of  the  note , as  the  “debtor”  and  as  the  “source” 
where  the  income  originates,  is  required,  in 
paying  such  note,  to  withhold  the  normal  tax 
of  one  per  cent  on  the  entire  amount  of  the 
note,  if  said  note  is  in  excess  of  $3,000,  unless 
a claim  shall  be  made  for  exemption  of  $3,000 
or  $4,000  (as  the  case  may  be)  under  the  pro- 
visions of  paragraph  C,  section  2 of  the  act; 
and  if  such  claim  for  exemption  shall  be  made 
(as  provided  for  on  Form  1007),  then  the  said 
tax  shall  be  withheld  only  on  the  amount  of 
said  note  in  excess  of  the  exemption  claimed 
in  said  certificate. 

If  any  person  who  has  purchased  or  dis- 
counted any  of  said  notes  may  have  omitted, 
in  acquiring  them  from  previous  holder,  to 
make  a deduction  or  allowance  for  said  tax, 
such  purchaser  can  only  look  for  re  ief  to  the 
person  from  whom  he  shall  have  gotten  the 
notes,  and  the  “debtor,”  the  maker  of  said 
notes,  will  be  held  liable  for  and  be  required 
to  deduct,  withhold,  and  pay  to  the  collector 
of  internal  revenue  the  amount  of  the  normal 
tax  of  one  per  cent  which  may  be  due  thereon 
under  the  law  and  these  regulations. 

To  illustrate : 

A (unmarried,  and  who  does  not  claim  the 
$3,000  exemption  provided  in  paragraph  C of 
section  2 of  the  income-tax  law)  borrows  on 
May  1,  1912,  $120,000  from  B at  6 per  cent 
per  annum  interest  on  two  years’  time  and 
gives  B his  bond  for  $120,000  for  the  princi- 
pal and  four  $3,600  notes,  each  representing 
six  months’  interest,  for  the  maturing  interest, 
payable  May  1 and  November  1 each  year. 
On  October  1,  1913,  B takes  A’s  interest  note 
for  $3,600,  due  November  1,  1913,  (which 
bears  no  mark  to  indicate  that  it  represents  in- 
terest), to  the  Richmond  National  Bank;  the 
bank  is  not  informed  that  the  note  represents 


37 


HARRIS  TRUST  SAVINGS  BANK 


interest,  but  being  satisfied  that  A,  the  maker 
of  the  note,  is  good  without  additional  in- 
dorsement, discounts  the  note  for  B at  the  rate 
of  6 per  cent  per  annum  and  pays  to  B the  pro- 
ceeds— $3,582. 

On  November  1,  1913,  the  note  matures  and 
the  bank  calls  on  A,  the  maker,  to  pay  the  note. 
A offers  the  bank  $3,564,  which  is  equal  to 
$3,600  less  the  one  per  cent  tax  of  $36,  inform- 
ing the  bank  that  the  note  represents  interest 
which  he  owes  and  that,  under  the  Federal 
income-tax  law,  he  is  required  to  deduct  this 
tax  from  the  face  of  the  note  in  making  pay- 
ment. 

The  bank  claims  that  it  was  not  informed 
that  the  note  represented  interest  and,  there- 
fore, subject  to  this  tax;  but  A is,  nevertheless, 
required  under  the  law  to  withhold  the  tax . 

If  A under  his  contract  with  B had  agreed 
to  pay  the  interest  without  deduction  for  any 
income  tax  which  might  be  imposed  by  the 
Government,  he  would,  of  course,  after  de- 
ducting the  one  per  cent  tax  for  the  Govern- 
ment, pay  the  bank,  as  holder  of  the  note,  the 
full  amount  of  $3,600.  But  if  the  contract 
between  A and  B did  not  provide  that  A would 
pay  the  full  interest  without  deducting  such  in- 
come tax  as  the  Government  might  impose,  and 
if  the  bank  should,  therefore,  desire  to  reim- 
burse itself  for  the  amount  of  the  tax  thus  de- 
ducted by  A,  the  bank  can  look  only  to  B,  for 
whom  it  discounted  the  note,  and  the  question 
as  to  whether  this  $36  deduction  should  be 
borne  by  B or  by  the  bank  is  a question  which 
must  be  settled  mutually  between  the  bank 
and  B. 

W.  H.  Osborn, 

Commissioner  of  Internal  Revenue. 


j 


3 8 


